National

Three Reasons Why Gas Prices Have Gone Up in the last Two Months

Share

The chief economist at the American Petroleum Institute swatted away assertions that the main cause of increasing gas prices in January and February in the United States was because of oil refineries going offline and therefore reducing the supply of gasoline and bumping up prices at the pump.

When asked what had caused the price of gasoline to go up over 36 consecutive days beginning in January, API’s Chief Economist John Felmy said that it was “basically three factors” going into the increase.

“What we’ve seen is the cost of crude oil has gone up sharply,” Felmy said on C-SPAN’s Washington Journal. “The cost of ethanol which is blended about 10 percent in all gallons of gasoline [has gone up]; and demand is up. So the net effect is you’ve had 56 cent per gallon increase since December,” he continued.

Ethanol is blended into gasoline because of the Environmental Protection Agency’s Renewable Fuel Standard. The standard mandates a biofuel minimum in gasoline that will continue until 2022.

Felmy says that the solution to the high gas price problem is for oil companies to begin to produce more or a worldwide reduction in demand.

“As I like to say there’s three big factors: China. China. China,” Felmy said. “Were basically at a record level of demand–90 million barrells a day–and with limited supply and OPEC production cuts–that’s why you have a tighter market.

When asked by a caller whether the U.S. Federal Reserve Banking System’s monetary policy had anything to do with the rise in gas prices, Felmy said that when the value of the dollar goes down OPEC reduces production, and thus raises the price of gasoline.

Earlier in the week, Sen. Ron Wyden (D-Ore.), the committee chairman for the Senate Energy and Natural Resources committee, said he plans on holding a hearing on rising gas prices to explain why gas prices are rising — and that he would use to hearing to explore the refineries question.

He also said there is “no reasonable explanation” for gas prices to have risen in recent months.

“The Iranians are not rattling around this week in the straights of Hormuz. We have not seen any kind of unusual developments,” he said on C-Span’s sunday broadcast of Newsmakers.

In response to Wyden’s comments, Felmy said: “Well, it’s really straight forward. The cost of crude oil has gone up. You have to understand that there’s 42 gallons in a barrel. So you just calculate how much the price increased in terms of cents per gallon. And that was about 29 cents.”

He continued: “Ethanol went up the equivalent of three cents. And demand increased. It’s really just simple arithmetic. In terms of production, production’s down a little bit. But inventories of gasoline are up. So there’s plenty out there its just a matter of how much more does it cost to make.”

He also said that the recent drop in gas prices and crude oil prices shows the “normal relationship of gasoline prices lagging crude prices.”

Oil prices fell for three consecutive days beginning on February 23, according to the AAA. Gas prices for February were on average 3 cents higher than in February 2012. Prices also increased 38 cents in February–out of the 49 cent increase that began in January.

At the beginning of 2013, national gas prices averaged $3.29 but has since risen to $3.78 per gallon.

The AAA does not credit most of the rise in gas prices to a rise in crude oil prices.

“The recent surge in retail prices has been driven only somewhat by rising crude oil prices and instead has been the product of refinery maintenance and issues, which has been more dramatic in recent years,” the AAA said in a statement.

“This has subsequently meant less gasoline being produced and fewer supplies, which has squeezed prices higher,” the group continued.

As of March 3, the national average for a gallon of gas was $3.75.

Crude oil stocks rose for the sixth straight week to 377.5 million barrels, according to the Energy Information Administration – an arm of the U.S. Department of Energy. The sub-agency also reported that gasoline stocks fell to 228.5 million barrels in its weekly report ending on February 22, 2013.

Latest Tweets

By David Grain, Founder and Managing Partner, Grain Management, LLC In the aftermath of the Federal Communications Commission’s (FCC) historic vote on net neutrality, policymakers in Washington will continue to debate how to ...

Sen. Edwards, Sen. Cummings, Sen. Alsobrooks, Sen. Blake or Sen. Brown? With today’s announcement from Senator Barbara Mikuski (D-MD) that she will retire in 2016, there is a wide open opportunity for a Black Democrat in...

Republican National Committee Chairman Reince Priebus said it all pretty clearly in January 2013. Clearly some in the Republican party were not listening. Instead, Republicans appear to be “strategizing” to make...

Not One Dime in November 2014. Not One Viewer in February 2015. Black buying power has always been written about and talked about. But now, it’s actually being demonstrated in living color and in front of everyone w...

Shelby Steele Gets Owned By Ta-Nehisi Coates on National TV. Few TV talking head moments are worth watching again and again and again. But here is a winner from last week’s This Week with George Stephanopoulos where a...

3 Comments

The usage is down because people can’t afford to pay it and when the prices are down the people start going places. What the heck is a person supposed to do? Does anyone around care how the poor people are supposed to get to work. The rich don’t care. No one to help the poor people. The middle class is now included in the poor people class

they were sorry for what has happened? Has aynone on the BOT made a public comment saying that as soon as they can find the money from the state or our rainy day fund that teachers WILL be rehired? Has any one of the BOTers said they disagreed with the manner in which the terminations were handled?I know they have said the timing of these terminations is terrible as there are school board elections underway. Seems they do feel sorry for two people in the district.They just don’t Get it!

About Politic365

Politic365 is the premier digital destination for politics and policy related to communities of color. Not only do we create a positive media outlet for the empowerment and enrichment of our elected officials and community leaders, we also provide a venue for the exploration of issues important to our communities.

While our primary goal is to amplify discourse about communities of color, we openly welcome and encourage engagement by all audiences because the issues that affect us bear on the nation at large. Read More

Game Changers

In recognizing the power and importance of good leadership, Politic365 embarked upon a mission to identify and honor 365 individuals from across the country, all of whom are actively creating opportunities to improve the socio-economic and political climate in this country.

Whether through their social policy advocacy, political engineering, work behind the scenes at corporations large and small, or their ability to leverage their brand for the benefit of others, Politic365 Game Changers are shaping this nation in profound and dramatic ways. Read More